Intangible Assets - Branding
Nowadays, the value of intangible assets (such as people, knowledge, relationships and intellectual property, etc) takes up a greater proportion of the total value of most companies than is the value of tangible assets (e.g., machinery and equipment). And the creation and management of intangible assets plays an essential role for the sustainable development of your business.
Intangible assets are important, however, most business owners do not recognize how much their brand can impact their business value. The more in-depth analysis you undertake, the better estimate of value can be gained from it.
A strong brand is a distinct asset owned by a business or a component of a business' goodwill. Traditionally, there are three valuation methods for brands:
(I) The cost method is based on estimation of current costs or calculating the present value of all historical expenses for creating the brand.
(II) The market method focuses on sale transactions of brand names in the past. This valuation approach focuses on the estimation of value based on similar market transactions of comparable brand rights.
(III) The income approach measures the future values (e.g., sales, profits or cost savings) that the intangible asset will bring to a business, such as when and how long for a business to obtain those benefits.
People usually use an excess earning method with a discounted cash-flow model to establish value under the income method. It can be a variation of this approach which is to calculate the profits earned by your business with the strong brand name.
In conclusion, brand recognition is a very important component to elevate your business value. This value is achieved through increased earnings that are received steadily over a period of time. Effective brand management leads to a higher premium that you will receive from those intangible assets upon selling the business.